India Inc remains bullish on orders

Hopes for better business condition

Amidst expectation that economic activity would gather pace in current year, India Inc’s business confidence has hit an all-time high during the January-March quarter. The increased optimism is reflected in the CII Business Confidence (BCI), which has gone up to an all-time high of 64.1 during the fourth quarter of 2016-17 as against 56.5 recorded in the previous quarter.

Business conditions are expected to improve as over 63 per cent of the firms expected an increase in sales during Q4FY17 as compared to only 39 per cent in October-December 2016 while 60 per cent of the respondents anticipated an increase in new orders as compared to 41 per cent who witnessed the same in the preceding quarter.

The survey was conducted from JanuaryMarch 2017, covering more than 100 firms of varying sizes. Majority of the respondents (41 per cent) belonged to large-scale firms, while 12 per cent were from medium-scale firms and 37 per cent and 10 per cent were from small scale and micro firms, respectively.

Much of the recovery in business conditions according to the survey participants was largely anticipated from a recovery in domestic market as a large proportion of firms (61.8 per cent) expected to maintain status quo on their export orders in January-March 2017.

While the survey noted only a marginal improvement in the current situation index (CSI), it said the sharp increase in business sentiment was primarily driven by a significant uptrend in the expectation index.

“A sharp uptick in business outlook, at the onset of 2017, underpins the hope that the reform initiatives of the government would unravel a host of investment opportunities for firms, going forward,” said Chandrajit Banerjee, Director General, CII.

On the GST, which is likely to be implemented from July 1, 2017, a significant proportion of respondents (85 per cent) feel that it would take anywhere between 6 months to a year to see its positive impact on the economy. Firms were also seen keeping their investment plans on hold despite the expectation of an improvement in sales and new orders owing to the existing excess capacity in the economy. While capacity utilisation has seen an improvement compared to previous quarters, fresh investment can be expected only by the end of this year.